Donating to charity is a great way to get rid of a car when you don't have the time to negotiate with used car salesmen or don't think you can get what it's worth. Donating a car to a charity lets you deduct its fair market value from your taxable income.
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| How to Donate a car to charity |
1. Verify that the recipient is a charity. Make sure the organization is a registered 501(c)(3) charity or a qualified religious organization that can legally accept your donation from which you can rightfully claim a tax reduction. It is also advisable to find a charity that accepts vehicles without charging a removal fee.
2. Use the Kelley Blue Book or IRS Publications 526 ("Charitable Donations") and 561 ("Determining the Value of Donated Property) to determine the fair market value of your car. If it's worth $5,000 or more, have the car appraised by someone certified. If you donate a car to a qualified organization after December 31, 2004, your deduction is limited to the gross proceeds from its sale by the organization. This rule applies if the claimed value of the donated vehicle is more than $500. However, if the organization makes significant intervening use of or materially improves the car, you generally can deduct its fair market value.
3. Donate the vehicle. The Charity will most likely do one of two things: Use the car and bring it in as an asset or for charitable work, or sell the car and the funds generated will go to the charity.
5. Follow your state's regulations on what to do with the title and plates after notifying the motor vehicle department and your insurance company that you no longer own or insure the vehicle.Your receipt and completed IRS Form 8283 should be kept in a safe place; you'll be needing it when it comes time to file your taxes.
10 Things to know when donate a car or boat to charity
1. Avoid middlemen. Numerous for-profit intermediary organizations advertise aggressively on TV, billboards and elsewhere, offering to help you donate your vehicle to charity. Here’s the catch: These organizations typically keep about 50 percent to 90 percent of the vehicle’s value for themselves, and the charities don’t get what they could have gotten. To prevent this, check directly with charities you admire and find out whether they accept car or boat donations.
2. Find a worthy charity. If the charities you normally support aren’t equipped to accept such donations, do some homework until you find a reputable charity that is. You can research charities’ track records online at this Better Business Bureau site and through Charity Navigator.
3. Check the math. If you still feel compelled to use an intermediary organization possibly because you’re busy at least ask the organization how much of the car or boat’s value will go to charity. If the organization simply gives charities flat fees say, $100 for a used vehicle regardless of its value, or $2,000 a month your donation may not be eligible for a tax deduction.
4. Know the status of your recipient. In order for you to qualify for a deduction, the charity that gets your donation must be an IRS-approved 501(c)(3) organization. Your church, synagogue, mosque or temple likely qualifies. (Check first just to make sure.) You also can visit the Internal Revenue Service’s Web site and search for Publication 78 to find other qualifying non-profit organizations. (Just type “78” into the search field on the IRS home page and you’ll be directed to the right publication.)
5. Do the delivery yourself. Once you’ve identified a worthy charity, recognize that it will have to pay someone to pick up your car or boat for you. To help the charity maximize the benefit of your donation, drop the car or boat off yourself.
6. Transfer the vehicle with care. Want to eliminate all risk of running up parking tickets and other violations after you’ve said goodbye to your donated vehicle? Then formally re-title the vehicle to the charity, and report the transfer to your state’s department of motor vehicles or licensing. Never agree to leave the ownership space on the charity donation papers blank.
7. Your estimate of the donation’s value probably won’t cut it. If your car or boat is worth more than $500, the IRS is going to want to see evidence of how much the charity got for it. (Most charities that accept these donations turn around and sell them for cash.) You’ll need to get a receipt from the charity revealing exactly how much money it made.
8. Know when you can report the fair market value. You won’t need evidence of the sales price if the charity keeps the vehicle or vessel and uses it in its charitable work, or if your donation is worth less than $500. Then you can report its fair market value based on listings from Kelley Blue Book and similar sources.
9. Keep a thorough paper trail. If your donation is worth more than $500, you’ll have to attach IRS Form 8283 to your tax return. If it’s worth more than $5,000, your documentation must include an outside appraisal. You’ll also need proof of the donation, such as a receipt from the charity and a copy of the title change.
10. Be detail-oriented. This paper trail may seem cumbersome, but think about it: This may be one of the biggest charitable donations you ever make. By taking the time to dot the i’s, you can make sure that the charity gets the most benefit and you get the biggest possible deduction.
2. Use the Kelley Blue Book or IRS Publications 526 ("Charitable Donations") and 561 ("Determining the Value of Donated Property) to determine the fair market value of your car. If it's worth $5,000 or more, have the car appraised by someone certified. If you donate a car to a qualified organization after December 31, 2004, your deduction is limited to the gross proceeds from its sale by the organization. This rule applies if the claimed value of the donated vehicle is more than $500. However, if the organization makes significant intervening use of or materially improves the car, you generally can deduct its fair market value.
3. Donate the vehicle. The Charity will most likely do one of two things: Use the car and bring it in as an asset or for charitable work, or sell the car and the funds generated will go to the charity.
- If the car is used by the charity, you are entitled to the fair market value of the vehicle (any value over $5,000 can only be deducted after the car has been appraised by a third party appraiser).
- If the car is sold to generate funds for the charity, you are entitled to what the vehicle sold for. You will receive a receipt from the charity that should have the charity’s name, tax ID number, date of donation, donor’s name, and year, make and model of the donated car. This receipt will allow you to claim up to $500 of the vehicle’s value. If the sale value of your vehicle exceeds $500 you will be notified by the charity and be asked to fill out a W9 form (in essence, a request for your social security number). This is needed in order for the charity to file a 1098c form to register the donation with the IRS. You will receive a copy of the 1098c form from the charity that shows the sale value of your car.
5. Follow your state's regulations on what to do with the title and plates after notifying the motor vehicle department and your insurance company that you no longer own or insure the vehicle.Your receipt and completed IRS Form 8283 should be kept in a safe place; you'll be needing it when it comes time to file your taxes.
1. Avoid middlemen. Numerous for-profit intermediary organizations advertise aggressively on TV, billboards and elsewhere, offering to help you donate your vehicle to charity. Here’s the catch: These organizations typically keep about 50 percent to 90 percent of the vehicle’s value for themselves, and the charities don’t get what they could have gotten. To prevent this, check directly with charities you admire and find out whether they accept car or boat donations.
2. Find a worthy charity. If the charities you normally support aren’t equipped to accept such donations, do some homework until you find a reputable charity that is. You can research charities’ track records online at this Better Business Bureau site and through Charity Navigator.
3. Check the math. If you still feel compelled to use an intermediary organization possibly because you’re busy at least ask the organization how much of the car or boat’s value will go to charity. If the organization simply gives charities flat fees say, $100 for a used vehicle regardless of its value, or $2,000 a month your donation may not be eligible for a tax deduction.
4. Know the status of your recipient. In order for you to qualify for a deduction, the charity that gets your donation must be an IRS-approved 501(c)(3) organization. Your church, synagogue, mosque or temple likely qualifies. (Check first just to make sure.) You also can visit the Internal Revenue Service’s Web site and search for Publication 78 to find other qualifying non-profit organizations. (Just type “78” into the search field on the IRS home page and you’ll be directed to the right publication.)
5. Do the delivery yourself. Once you’ve identified a worthy charity, recognize that it will have to pay someone to pick up your car or boat for you. To help the charity maximize the benefit of your donation, drop the car or boat off yourself.
6. Transfer the vehicle with care. Want to eliminate all risk of running up parking tickets and other violations after you’ve said goodbye to your donated vehicle? Then formally re-title the vehicle to the charity, and report the transfer to your state’s department of motor vehicles or licensing. Never agree to leave the ownership space on the charity donation papers blank.
7. Your estimate of the donation’s value probably won’t cut it. If your car or boat is worth more than $500, the IRS is going to want to see evidence of how much the charity got for it. (Most charities that accept these donations turn around and sell them for cash.) You’ll need to get a receipt from the charity revealing exactly how much money it made.
8. Know when you can report the fair market value. You won’t need evidence of the sales price if the charity keeps the vehicle or vessel and uses it in its charitable work, or if your donation is worth less than $500. Then you can report its fair market value based on listings from Kelley Blue Book and similar sources.
9. Keep a thorough paper trail. If your donation is worth more than $500, you’ll have to attach IRS Form 8283 to your tax return. If it’s worth more than $5,000, your documentation must include an outside appraisal. You’ll also need proof of the donation, such as a receipt from the charity and a copy of the title change.
10. Be detail-oriented. This paper trail may seem cumbersome, but think about it: This may be one of the biggest charitable donations you ever make. By taking the time to dot the i’s, you can make sure that the charity gets the most benefit and you get the biggest possible deduction.
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